Insurer says previous insurer liable for subsidence claim

Subsidence Buildings insurance Insurance

A ‘new’ insurer believed that subsidence to an entire terrace had been happening before it took over responsibility for insurance. We looked at the facts to find a fair outcome.

What happened

When Arnold and Barbara bought their terraced house, they took out buildings insurance through the bank that provided their mortgage. Ten years later, a different insurer took over the provision of insurance. The following year, Arnold and Barbara made a claim for subsidence.

The insurer thought that most of the damage had happened before it started providing insurance for the property. It said that settlement and subsidence had been affecting the whole terrace for some years, causing long-term distortion and fracturing to the couple's house. And while there was some slight general continuing movement, subsidence movement of the floor had occurred before it had started to insure the property.

How we helped

We checked all the facts. The insurer said it was liable only for damage that had occurred when its own policy was in force. So the schedule of repairs prepared by its engineers was restricted to damage thought to have occurred after the point that the new insurer took over, and it left out general significant distortion to the property.

The insurer considered this distortion to be historic, rather than the result of the recent subsidence. It said the fact that ‘corrections’ had been made in the past confirmed this.

Arnold and Barbara said that substantial movement had occurred since they bought the property, and it had caused considerable distortion. They said that cosmetic repairs and decorations had been carried out from time to time, when damage and distortions became visible.

They were aware that floorboards and joists had been replaced before they bought the house, but understood that this was because of woodworm and rot.

The insurer didn’t consider the Association of British Insurers’ Domestic Subsidence Agreement to be relevant in this case, because it excluded damage that had 'occurred before an insurer took on an insured risk'.

We established that there was no relevant period when the property had not been covered by buildings insurance.

While some of the distortion was thought to have occurred after the point that the insurer changed, it seemed likely that much of it had occurred before that point, but after Arnold and Barbara first moved in and took out insurance.

Putting things right

We said that the Association of British Insurers’ Agreement was relevant and the property had been continuously insured, so the insurer should deal with the entire claim and could not exclude damage that pre-dated its own policy.